Economist of the day

Ecuador’s president Rafael Correa [ht: ke] has been elected to a third term in power.

What policies has your government pursued in order to reduce inequality?

Latin America holds the grim title of most unequal region in the world, and the Andean countries are the most unequal part of that region. This is why it was crazy to apply the neoliberal system, supposedly based on competition and the liberation of the market, in countries like Ecuador in recent decades. What competition were they talking about? It was a massacre. Now we are reducing inequality, and poverty with it, through a combination of four things. Firstly, making the rich pay more taxes. We have instituted a much more progressive taxation system, and people now actually pay their taxes—collection has doubled. These resources, together with oil revenues and the money saved by reducing the debt burden, can be devoted to education, health and so on. This is the second point: giving equality of opportunities. People no longer have to pay for healthcare or education, which were quite expensive for the poor—school enrolment cost $25 per child, but is now completely free; some children are given books and uniforms too.

Thirdly, governing the market and improving the labour system. The market is a reality that we cannot avoid; but believing the market should allocate everything is a different matter. The market needs to be governed by collective action. We are putting an end to forms of exploitation such as subcontracting. We are improving real wages—we have been able to close the gap between family incomes and a basic basket of consumption goods. Around 60–65 per cent of families could afford the basic basket at the start of our mandate, now we’ve reached 93 per cent, the highest in the country’s history. We’ve disproved orthodox economic theory, the idea that to generate employment one needs to lower real wages: here the real wage has risen substantially, and we have one of the lowest unemployment rates in the region—just under 5 per cent. We’ve also paid attention to the quality of employment, making sure businesses comply with labour laws. While raising wages for labour, we’ve reduced the remuneration for capital. In this country, if one proposed raising the minimum wage by a few dollars one was called a demagogue, a populist, but no one was surprised by interest rates of 24–45 per cent. We drastically lowered interest rates, to 8–9 per cent, for the corporate sector.

Fourthly, distributing adequately our social patrimony. We used to give away our oil: before the Palacio government, transnational companies would take the equivalent of 85 out of every 100 barrels and leave us with 15; now we have renegotiated the contracts, the proportions have been reversed. Another example: after the economic crisis of 1999–2000, many enterprises which were used as collateral for loans should have ended up in state hands; it was we who finally seized them. In the case of the Isaías Group, owned by the family of the same name, in 2008 we recovered around 200 enterprises. Other governments would probably have privatized them again, so they would end up in the same hands as usual. We’ve used the public banking system to provide finance so that the workers themselves can buy all or part of these enterprises.